DIGITAL DEALING

How E-Markets Are Transforming the Economy

An economist describes and assesses for the lay reader the varieties of current e-market models and speculates about the future of e-commerce.

Hall (Economics/Stanford Univ.) knows the territory—and forecasts a bright future for it. A consultant to Napster, Apple, and Oracle, he lives comfortably in the e-world, speaks the language, understands its principles, and usually explains them so that even Internet tyros will comprehend. (Further evidence of Hall’s cyber-savvy: He has created a Web site featuring material to supplement his text.) Hall begins with a simple assertion: “In e-markets, people make deals.” He then proceeds to explain what he has identified as the six primary e-market models, using such familiar names as eBay, Amazon, Priceline, and Nasdaq to illustrate. Along the way, he explores some basic economic concepts—most prominently, what he calls the “zero-profit principle,” holding that new sellers will continue to enter an emerging e-market until the last one in stands to earn a profit of zero. There is a compelling chapter about on-line auctions (with prudent advice for eBay users and an explanation of how eBay has come to dominate the market), a dense discussion of Nasdaq, and an interesting assessment of online book-buying (books are almost always more expensive than at a bricks-and-mortar bookshop). Hall’s brief account of the recent Napster case is also intriguing. He argues that the music industry, by failing to protect itself against copying, has proved rather more intransigent than innovative. And he twice declares that Priceline teetered at the precipice of destruction when they attempted to supplement their profitable airline ticket business by entering the grocery, gasoline, and phone service arenas, where, says Hall, it didn’t belong. Hall includes numerous graphs and charts, most comprehensible, and he ends each chapter with a feature he calls “Takeaways”—bullet-lists of his main points, arrayed, one supposes, for harried businesspeople troubled by paragraphs and other indications of complexity.